Farmers Elevator Mut. Ins. Co. v. Carl J. Austad & Sons, Inc.

• Decision Date: 18 March 1965
• Docket Number: No. 17773.,17773.
• Citation: 343 F.2d 7
• Parties: FARMERS ELEVATOR MUTUAL INSURANCE CO., a corporation, Appellant, v. CARL J. AUSTAD & SONS, INC., a Corporation; Tri-State Insurance Company, a Corporation; L. P. Gas Transport Company, a Corporation, and Martha D. Tatro, Individually and as Trustee for the North Dakota Workmen's Compensation Bureau, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

343 F.2d 7 (1965)

FARMERS ELEVATOR MUTUAL INSURANCE CO., a corporation, Appellant, v. CARL J. AUSTAD & SONS, INC., a Corporation; Tri-State Insurance Company, a Corporation; L. P. Gas Transport Company, a Corporation, and Martha D. Tatro, Individually and as Trustee for the North Dakota Workmen's Compensation Bureau, Appellees.

No. 17773.

United States Court of Appeals Eighth Circuit.

March 18, 1965.

William R. Reichert, Dickinson, N. D., made argument for the appellant and filed brief with Frederick Saefke, Jr., Bismarck, N. D.

Patrick A. Conmy, Bismarck, N. D., made argument for appellee, Tri-State Ins. Co. and filed brief.

E. F. Engebretson, Bismarck, N. D., made argument for appellees Carl J. Austad & Sons, Inc., and L. P. Gas Transport Co. and filed brief.

Before VOGEL, MATTHES, and RIDGE, Circuit Judges.

MATTHES, Circuit Judge.

This declaratory judgment action was filed on August 19, 1963, in the United States District Court for the District of North Dakota. Farmers Elevator Mutual Insurance Co. (Farmers), an Iowa corporation, was plaintiff and is the appellant. The defendants and appellees are: Carl J. Austad & Sons, Inc. (Austad); Tri-State Insurance Company (Tri-State); L. P. Gas Transport Company (Transport) and Martha D. Tatro, individually and as Trustee for the North Dakota Workmen's Compensation Bureau.

The purpose of this action is to obtain a judicial determination of the following questions: (a) whether or not Tri-State must defend Scranton Equity Exchange (Scranton) in the wrongful death action brought by Martha D. Tatro in the District Court of Bowman County, North Dakota; (b) whether Tri-State has the primary coverage or liability upon Scranton in such case or on an equal basis with Farmers; (c) whether if Tri-State for any reason is not primarily liable that Transport should be required to defend Scranton in such action.

Diversity of citizenship and the amount involved establishes jurisdiction of the subject matter. There arose, however, and still exists a venue question as to Transport. There is the additional contention that the Court's decision on the merits is erroneous.

Before passing to the problems presented by the appeal, we deem it desirable to designate and more fully describe all parties having any connection with this litigation or the event which caused the death of Harry Tatro, the husband of Martha D. Tatro, out of which this action arose.

Scranton, not a party, is a cooperative which owned and operated a liquified petroleum bulk storage plant in Scranton, North Dakota. Farmers had issued a liability insurance policy to Scranton which covered Scranton's bulk storage plant and was in effect when the incident occurred giving rise to the coverage question. Austad is a North Dakota corporation that was engaged in the transportation of petroleum products by motor truck. Tri-State was authorized to do business in North Dakota and was a resident of that state for venue purposes. Tri-State had issued a policy of liability insurance to Austad which covered the motor equipment used for transporting petroleum products. Harry Tatro was an employee of Austad; Martha D. Tatro, a defendant and appellee, is the widow of Harry Tatro. The complaint alleged that Transport, a Wyoming or Montana corporation, had authority from the I.C.C. to transport petroleum products in other states; leased trucks and drivers from Austad and transported petroleum products in such leased equipment.

The operative facts, stipulated by the parties and so found by the District Court, are as follows. On June 8, 1961, a tractor and tank trailer combination unit, owned by Austad and driven by Harry Tatro, stopped at the facilities and property of Scranton for the purpose of making a delivery of propane gas. Tatro drove such unit to the unloading area of the bulk plant and hooked up the hoses used on the truck to the truck outlets and to the inlets on the pipeline system maintained by the bulk plant; Tatro was in the process of opening a valve located on top of a storage tank when an explosion occurred, the effect of which was to knock him off the tank, set him afire and inflict injuries which proved fatal. The delivery was made at approximately midnight at which time no employees, agents, or representatives of Scranton were present or participated in any manner in the subsequent unloading procedures. It was the custom under such circumstances for the driver of the truck making the delivery, to perform everything that was necessary for the unloading and later deliver the papers evidencing such unloading and the quantity unloaded to the manager of the plant, and insofar as the incident here involved is concerned, the driver was acting pursuant to such custom. Tatro's widow, Martha D. Tatro, sought and received benefits under the North Dakota Workmen's Compensation Act. Prior to the institution of the present action Martha D. Tatro, individually and as Trustee for the North Dakota Workmen's Compensation Bureau, brought the wrongful death action against Scranton for damages resulting from the death of her husband, alleging that the death of Tatro was proximately caused by the negligence of Scranton in the construction and maintenance of its storage facilities.

Farmers, while conceding that it is the liability insurer of Scranton, tendered the defense of the Tatro action to Tri-State on the theory that Scranton was an additional insured under the Tri-State policy. This tender of defense was refused by Tri-State.

Early in this litigation, Transport raised the venue question. It filed a motion to dismiss, or in lieu thereof to quash the return of service of process on the ground that it had not been properly served, and that the venue was improper in that all defendants do not reside in the State of North Dakota. Two affidavits dated September 27, 1963, were filed in support of the motion — one by Transport's attorney to the effect that Transport was not doing business in North Dakota when this action was instituted; that on January 8, 1962, a plan of dissolution was approved by the stockholders of Transport and in pursuance thereof all assets for the corporation were disposed of and the transfer of the assets was completed on January 4, 1963; and since that date the corporation existed as a mere "corporate shell" and has had no officers or directors. The other affidavit by the Secretary of State of North Dakota was to the effect that Transport is not and never has been authorized or qualified to transact business in North Dakota according to the provisions of the North Dakota Business Corporation Act. Neither affidavit was controverted.

On January 27, 1964, the trial court entered an order granting Transport's motion and dismissed the complaint and action against that defendant.

On February 13, 1964, the trial court filed a memorandum opinion on the merits finding that Tri-State's policy did not provide coverage to Scranton for Tatro's death and that Tri-State is under no obligation to defend the Martha D. Tatro action. The Court's opinion is published at 238 F.Supp. 243. Appellant filed a petition for rehearing in which it complained in particular of the Court's prior action in dismissing Transport from the case. The petition was denied on April 14, 1964, following which, appellant filed a timely notice of appeal.

Appellant's first point challenges the Court's dismissal of the action against Transport. The issue brings into prominence Title 28 U.S.C.A. § 1391, the venue statute which in pertinent part provides:

"(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in the judicial district where all plaintiffs or all defendants reside.

* * * * * *

"(c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes."

As noted, appellant brought this action in the judicial district of North Dakota, the residence of all defendants with possible exception of Transport. The precise question is whether, for venue purposes, Transport is also a resident of that...